Seoul’s buoyant office market has provided an opportunity for one of the biggest US property investors to nearly double its money, with Invesco Real Estate announcing today that it has sold Majestar City Tower B, an office block in the Gangnam business district for KRW 520 billion ($386.5 million).
The Atlanta-based asset manager is selling the 46,000 square metre (495,140 square foot) tower to a REIT managed by local fund manager Koramco, according to an Invesco announcement, after the American firm acquired the building upon completion in 2017.
“Majestar was acquired six years ago and has delivered attractive risk adjusted returns to our investors, said Ian Schilling, head of core funds for Asia Pacific at Invesco Real Estate. He added that, “The sale price achieved is almost double our original purchase price.”
The deal comes as Seoul stands out as the strongest office market in Asia Pacific with vacancy in Gangnam having fallen to 1.2 percent in the third quarter and rents having risen 13.8 percent from a year earlier, according to JLL.
Invesco had signed up to buy Majestar City Tower B on a forward purchase basis in 2016 through a vehicle managed by IGIS AMC, with the 17-storey project completed one year later. At the stated consideration, Invesco is selling the project for the equivalent of KRW 11.3 million per square metre.
The grade A building at 1501-1, Seocho-dong is within a three-minute walk of the Seocho station on Seoul’s metro line 2 with the project having attained LEED Platinum certification under the US Green Building Council regime for sustainability.
The building is part of a mixed office, retail and residential project which spans a total of 148,000 square metres. The complex, which includes one additional office tower in addition to a retail podium and a pair of condo towers, links directly to Korea’s supreme court as well as to Seocho High School and Seoripul Park.
According to listings Majestar City Tower B has typical floorplates of 2,187 square metres and units in the building are available for around KRW 29,600 per square metre per month.
Koramco is well acquainted with the market for the asset with the company having agreed to acquire the other office tower in the Majestar complex in 2017, one year after Invesco’s deal, according to a report by Savills.
Positive on Korea
The purchase from Invesco may be followed in the coming weeks with another Koramco acquisition, with the fund manager now locked into exclusive due diligence Blackstone for the purchase of the US fund manager’s Arc Place tower – also in Gangnam – for a reported KRW 750 billion.
“Supported by solid office fundamentals, the Gangnam Business District is one of the most diverse office hubs and home to an increasing number of businesses,” Gideon Lee, head of Korea for Invesco Real Estate said. “Majestar was previously a fringe office location, but we identified strong growth potential in the area due to the expansion of the GBD office market and significant shortage of future office supply.”
During 2023 South Korea has risen to become the second biggest office investment market globally, according to data from MSCI. Some $3.4 billion of South Korean office assets changed hands in the second quarter, which was 15 percent above pre-pandemic levels.
Encouraged by its profitable exit and the favourable supply-demand dynamics in the local market, Invesco says its ready for another serving of Seoul.
“South Korea continues to be a key market for our Asia Pacific program,” Lee said. We hold a variety of assets in various segments such as logistics and continue to look for compelling opportunities to replicate the success we had with Majestar.”